Island Fever

The SEC considers new stock market rules ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

June 9, 2022 Read in Browser TOGETHER WITH Good morning. Ford's new electric F-150 Lightning pickup truck comes with a curious accessory: an adapter to charge Teslas that are out of juice. While the electric F-150 beat Tesla's Cybertruck to market and has enough power to supply an entire home during grid outages, Ford CEO Jim Farley insisted the adapter was merely a gesture of goodwill. "Not trolling. Just helpful," he tweeted. Too bad, Elon probably would have appreciated the troll. Morning Brief • The SEC is considering rule changes that have brokers ready to sue. • You're now getting two fewer chicken wings at Dominos thanks to "shrinkflation." • The British Virgin Islands receive two more years of independence. Please do not delete this text. Please do not delete this text. Stock Markets The SEC Is Thinking About Shaking Up How Stocks are Traded, Brokers and Wholesalers are Not Happy The secret's out. After days of speculation, Securities and Exchange Commission chair Gary Gensler confirmed Wednesday that the agency is exploring new rules that would upend stock market trading.   The SEC is considering requiring brokerages to route stock purchases by individual investors, who fuelled the meme stock boom and bust cycle last year, into auctions. Supporters say the move would lead to better trading execution for investors, but brokers are worried billions in revenue — and the freedom of individual traders — are in jeopardy. Go With the Order Flow Right now, when a person hits buy or sell in their investment account, rules call for the broker handling the transaction to use "reasonable diligence" — that means searching for the best market to execute the trade, where the customer gets the most favorable price.   Many brokers outsource this work to electronic trading firms called wholesalers instead of to stock market exchanges because, they say, wholesalers offer the best prices. One wholesale giant, Citadel Securities, says it executes half of all retail trading volume. In return, wholesalers pay the brokers — Charles Schwab and Robinhood, for example — for sending trades their way, a tactic called "payment for order flow."   Does that create a conflict of interest and limit competition for orders, or does it streamline investing and make it more accessible to everyday Americans? That's where the SEC and industry are in a war of words: • "I think we can do better here for retail investors," Gensler said Wednesday. In the alternative model being explored by the SEC, firms would compete against one another in an auction-style format for the right to fill orders, upending the business of wholesalers and the brokers who get paid by them. • The industry argues the current model has generated billions in revenue, ushering in a wave of commission-free trading options that have turned millions of Americans into investors. "To say that we don't want that anymore, that we don't want these people in our markets, I think is really disturbing," Dan Gallagher, chief legal officer of Robinhood (which made 72% of its net revenue from routing stock, options, and cryptocurrency in the first quarter) told The Wall Street Journal. Challenge Flag: If the SEC adopts a rule, it could face aggressive legal challenges. Previous rules have been struck down by judges who ruled the agency failed to sufficiently perform legally required cost-benefit analyses. "You have to identify something that needs to be remedied," Gallagher said. "And here, as we've been talking about retail investors, which this proposal apparently will target, I don't see it." Please do not delete this text. Please do not delete this text. Consumer Economy Packages Shrinking is the Latest Inflationary Symptom You're not crazy: there are five fewer Kleenex in that box than normal.   Consumers may feel like their eyes are deceiving them, but companies have begun quietly shrinking the sizes of packages without lowering prices, sometimes even raising them. It's called "shrinkflation," an especially annoying consequence of rising consumer costs. Honey, I Shrunk the Sour Patch Kids We need not retread the well-worn inflation story — companies are desperately seeking to offset the rising costs of ingredients, packaging, fuel, and transportation.   Shrinkflation, or "down-switching," has become an easy cheat to simply sell customers less stuff for the same price. The Associated Press took notes on what we'll call the incredible shrinking grocery aisle: • In the US, the AP found a small box of Kleenex comes with 60 tissues, down five from just a few months ago. Chobani Flips yogurts are now 4.5 ounces rather than 5.3. Procter & Gamble shrunk its Pantene Pro-V Curl Perfection conditioner from 12 fluid ounces to 10.4 and kept its $3.99 price tag. Dominos 10-piece chicken wings are now eight pieces but they're still $7.99. You get the gist. • The tactic appears to be working. Pepsi, which changed the definition of "Party Size" Fritos Scoops from 18 ounces to 15.5 ounces, reported that operating profit rose 128% in the first quarter, well above the 11% in 2021. "I'm not saying they're profiteering, but it smells like it," Hitendra Chaturvedi, a professor of supply chain management at Arizona State University, told the AP. "Are we using supply constraints as a weapon to make more money?"   The Less Part of Waking Up: Folgers shrunk its 51-ounce containers to 43.5 ounces but says they still make 400 cups of coffee, citing a new technology that makes lighter-weight beans. Sure. Please do not delete this text. Please do not delete this text. 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Get started with Domain Money and see what you've been missing. Please do not delete this text. Please do not delete this text. Governments The UK Declines Direct Rule Over British Virgin Islands (Road Town, Tortola, British Virgin Islands; Photo by Roger W.)   This is a story about second chances.   In April, a UK government commission released a damning report alleging widespread economic and political corruption in the mostly-autonomous British Virgin Islands (BVI). The report's authors called for the suspension of the BVI's constitution, the cessation of its elected officials, and the imposition of direct British rule. But on Wednesday, the UK opted to give the territory's newly reformed government two more years to clean up their act. We'll call this a reverse declaration of independence. Truss the Process Home to 30,000 people, the beautiful British Virgin Islands are also a welcome sanctuary for offshore money — with more than 350k shell companies cloaking the ownership of >$1.5 trillion in assets.   The UK report, commissioned last year, described a bleak environment: "Almost everywhere, the principles of good governance, such as openness, transparency and even the rule of law, are ignored," said Sir Gary Hickinbottom, the retired judge who led the inquiry. Days before the report was released, an unrelated US-led sting operation led to the arrest of BVI's top government official, premier Andrew Fahie, on charges of money laundering and drug smuggling. UK and US law enforcement claim it's just one instance of a larger pattern of drug trafficking on the BVI.   Following Fahie's arrest, elected politicians from multiple parties formed a Government of National Unity, installed a new premier and promised swift action and accountability. UK foreign secretary Liz Truss has decided to give them a chance: • The BVI's new leadership deserves the opportunity to "demonstrate their commitment to reform," Truss said Wednesday, adding they must implement 48 policy recommendations made in April's report. • "The people of the BVI want and deserve change and have made their desire for better governance clear. Elected officials know this," Truss said. Still, the territory is not out of the woods yet. Truss warned failure to demonstrate change in the next two years could lead to the ultimate imposition of British rule. Sounds like a not-so-modest proposal. Please do not delete this text. Please do not delete this text. Extra Upside • Spirit Airlines is postponing a shareholder vote set for Friday on rival buyout offers from Frontier Airlines and JetBlue, because they two keep sweetening their proposals. • Good news for the future: Moderna's updated Covid shot is even better at protecting against Omicron. • A Reminder That Markets Do Fall. Diversification Matters. 2022 has been an important reminder that sophisticated portfolios should be diversified, including important alternative assets like VC. Alumni Ventures makes it easy for accredited investors to add professional venture capital to their portfolio. Access highly-competitive private investments via smart, simple venture funds. Start today with Alumni Ventures.* *Partner Please do not delete this text. Just For Fun Earth's rotation.   Problem solver. Written by Sean Craig and Brian Boyle. Disclaimer This information is a paid endorsement by a non-customer for promotional purposes. 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